PUBLIC ACCOUNTS COMMITTEE (REPORTS)

HC Deb 07 December 1972 vol 847 cc1689-743

4.12 p.m.

Mr. Edmund Dell (Birkenhead)

I beg to move, That this House takes note of the First, Second and Third Reports from the Committee of Public Accounts in the last Session of Parliament and of the Treasury Minute on those Reports (Command Paper No. 5126). I am sure that the whole House will join me in expressing regret that my right hon. Friend the Member for Manchester, Cheetham (Mr. Harold Lever) is not able to move the motion. I am sure that we all wish to send him and his family our best wishes for a speedy return to good health. During the last Session of Parliament the Public Accounts Committee was stimulated, guided, instructed and amused by my right hon. Friend. Witnesses who appeared before the PAC may sometimes have been surprised—pleasantly I hope—when, after a lengthy and penetrating inquiry, he suddenly expressed the committee's complete and sympathetic understanding, but that was in line with what he said during the debate on the Report of the PAC last year and I shall read what he said because I am sure that if he were here today he would make the same point about the functions of the committee.

My right hon. Friend said: Our function is to encourage foresight and care in officials, not to discourage flexibility because of the feeling, if something goes wrong, that they would have been wiser to stick to more staid, if less justifiable, rules.…Members of the Committee will want the Civil Service to know that, in judging what has happened when things have gone wrong, we place ourselves emphatically in the minds of the officials themselves, not with a view to discouraging flexible initiatives, not with a view to encouraging the play-safe attitude which can always ensure that someone does not come before the Committee."—[OFFICIAL REPORT, 2nd December, 1971; Vol. 827, c. 707.] We know my right hon. Friend to be the most practical philosopher of them all. I should refer to him as a philosopher-king were it not for his well-known democratic sentiments.

I should like on behalf of the Committee to express thanks to the Comptroller and Auditor-General, Sir David Pitblado, and to the Exchequer and Audit Department from which the PAC draws its strength and is enabled to get through its very considerable body of work. It is their assistance and the fact that they have access to the papers of the Government which ensures that the PAC's proceedings take the form not of a loose exchange of untested ideas, statements and allegations, but of an inquiry into questions of administration and sometimes, though now, fortunately, rarely, propriety, where the facts and statements under discussion are substantiated, or may have to be substantiated, by the actual records of Government.

May I also express the Committee's thanks to Mr. Phelps, the Treasury Officer of Accounts, who was always commandingly in attendance, and to Mr. G. C. Eccleston who has just retired as Clerk to the PAC, and may I extend a welcome to Mr. J. L. Rose, the new Clerk of Committee.

Membership of the Committee seems to have a remarkable effect on the personal prospects of hon. Gentlemen opposite. In the middle of the year two Conservative Members—the hon. Members for Leicester, South-West (Mr. Tom Boardman) and Woking (Mr. Onslow)—were whipped into the Government and the Financial Secretary to the Treasury became the Chief Secretary. This, I take it, means that there is an emphatic demand from hon. Gentlemen opposite for membership of the PAC, and it is no doubt due to this extraordinary competition for a place on the PAC that this year the Committee is being set up so late.

I should like to draw the attention of the House to the fact that the Committee still has not been set up, but I hope that it will be tonight. This is later than at any time while I have been a Member of the House and, I suspect for many years past, and this has the inevitable and serious effect of disrupting the programme that we prepare for ourselves.

There has been a slight change this year in the Committee's practice in reporting to the House. There used to be three reports, the first dealing with excess votes, the second dealing with virement—a word which I always found difficult to understand, and it has been abolished just at the point at which I began to understand what it was—and a third report, which was our substantial report, a bulky document, the publication of which was authorised in July, with eventual publication in the middle of the Summer Recess, perhaps in August or September. It was a bulky volume with which hon. Members no doubt amused themselves during the summer holidays.

We felt that that was perhaps asking a little too much, even from our enthusiastic readers. We have this year adopted the practice of dividing our substantial report and publishing our Second Report as it was, which was authorised in May when the House was still sitting, and our Third Report which appeared at about the same time as our substantial report used to appear. I hope that that will be for the convenience of the House and I hope, too, that it will be the practice of the PAC in future to publish as we decide.

I do not intend to go through the First, Second and Third Reports of the PAC. They are there for the House to read. I propose, instead, to choose a theme which unites certain aspects of these reports, but before coming to that I should like to refer to one item which falls rather outside the theme that I shall take, and that is our reference to the Commonwealth Development Corporation.

Here we find the PAC perhaps in an unusual rôle of stimulant of public expenditure. I was interested to receive the Treasury Minute which comments on that part of our report. It says on page 4: Because of the general pressure on the Aid Programme it has not been possible to increase Government advances to the CDC to the level mentioned in paragraph 9 of the Committee's Report". I regret that. It then goes on to say in the final paragraph of that section of the Treasury Minute: The Government and CDC believe as a result of their joint discussions, now complete, on both future allocations and the improvement of arrangements for concessionary finance, CDC is in a position to extend its investments in projects of high development value and to extend its operations in those areas where they can be of particular benefit. I was glad to see that response from the Government to what the PAC was recommending, particularly because the PAC was acting in what might be regarded as an unusual rôle.

The theme which I take in moving the motion is the oversight exercised by the PAC on Government investment in industry. Before coming to my theme, I should declare an interest. I was a Minister when some of the matters covered in the report were the responsibility of the last Government. It is perhaps a curious feature of the practices of this House that ex-Ministers can find themselves members of the PAC and turning a critical retrospective gaze on matters for which they may have been responsible. Here we have the poacher turned gamekeeper. I am reminded of the passage from the "Mikado" where Koko says: A man cannot cut off his own head and Pooh-bah replies: A man might try. I have "tried" to the best of my ability as a member of the PAC, and I assure the Government that with the passage of time we are getting deeper and deeper into their records.

The relevance of what the PAC has to say about Government investment in industry is enhanced by the events of the last year. In the debate on the PAC last year, on 2nd December 1971, the Chief Secretary, as he now is, who was then the Financial Secretary, said: The investment grant scheme has now terminated…"—[OFFICIAL REPORT, 2nd December, 1971; Vol. 827, c. 763.] But this year we have had the Industry Act 1972. The policy of the Government seems to have changed. I make that remark in that way, tentative rather than categoric, to avoid any suggestion that as acting spokesman of the PAC today I am dealing with policy. The PAC does not concern itself with policy directly but with the administration of policy and with the propriety of public expenditure.

Many times during the passage of the Industry Act 1972 the Government appealed to the PAC as a protector of the public interest. The Second and Third Reports show the PAC at work in defending the public interest. I will give the House a few brief examples. With reference to the Central Council for Agricultural and Horticultural Co-operation, we emphasised the importance of adequate vetting and monitoring procedures. I am glad to see that in the Treasury Minute the Government accept that. With regard to the Sugar Board, we emphasised the importance of efficiency. In the Second Report at paragraph 59 we said: There is a clear need, particularly in view of the proposed entry to the European Economic Community. to ensure that sugar is produced by the most efficient methods. They trust, therefore, that the inquiry will produce proposals to this end and that reorganisation will follow promptly. I was interested to see the Treasury Minute's response to the recommendation of the PAC, which at page 6 reads, rather peculiarly, as follows: Full account will be taken of the Committee's view that there is a clear need to ensure that sugar is produced by the most efficient methods. I am interested in the words, "full account will be taken". I know of many areas of policy where efficiency is far from the last word to be said on any question, but here I should have thought that efficiency is rather important. I wonder why the Government phrase their response in that odd fashion?

We considered the affairs of the Atomic Energy Authority. We were limited because the Government are reviewing their policy. There has been the Vinter Report which we have not seen. There is the Secretary of State's statement of 8th August 1972, and now there is a further review in progress. We understand that the final decisions will be reached in about a year. The PAC must look at these matters further. It will wish to penetrate and understand the whole of the argument about the administration of atomic energy policy.

One of the PAC's comments that has been most commented on since the report appeared was about assistance to shipbuilding. In the Third Report at paragraph 13 we said: Your Commtitee are concerned that many millions of pounds of public funds provided for distribution to the ship-building industry through the SIB have been spent for purposes which had little to do directly with improving the industry's ability to compete in world markets. We are subsequently told that as a matter of policy—this is at page 6 of the Treasury Minute—one of the purposes of Government assistance to industry is to support employment. I welcome that statement. I also welcome the fact that the Treasury and the Department of Trade and Industry agree that further assistance from public funds should be used as effectively as possible for the development of a viable ship-building industry.

The PAC commented on two Governments' experience with the RB211 aero-engine. We welcome the acceptance by the Department of Trade and Industry and by the Treasury of the need to assess the potential cost against the resources and commitments of the company. The lesson to be learnt is that when a Government embark on the financing of advanced technology—and not just then—they cannot rely on their commitment being limited by a contract such as a launching aid contract. They must understand the full responsibility that they are undertaking. That is a point which the Government now clearly express as their own view.

Having indicated the areas of the report that bear on my theme, I refer the House particularly to an answer from Sir Anthony Part, the Permanent Secretary of the Department of Trade and Industry, made to the Committee on 8th March 1972. In the answer to Question 1548, he spoke of the Government's relations with firms in which they invest. To summarise what he said—I accept that a summary cannot do full justice to so long and important a reply—he said that the Government did not wish to disturb or confuse the responsibility of directors of assisted companies. Secondly, he said that the Government must be able to satisfy themselves in what are frequently very difficult areas of policy as to what exactly is happening in a company. It is not, of course, clear that these two points are always easily compatible, which is a fact of which the Department of Trade and Industry is aware.

Sir Anthony went on to say, quoting an answer which the then Chief Secretary had given on the previous day, that no one should assume, unless the Government commit themselves to that extent, that Government investment implies that the Government accept liabilities for a company's debts. These are all matters which the Treasury, the DTI and the PAC will wish to watch carefully.

The question which arises from these reports, and out of the comments which I have briefly summarised, is whether the House is satisfied that the PAC, as it now exists and operates within its present terms of reference, has the power and capacity to discharge its functions adequately.

The power of the PAC comes from the fact, first, that it has the aid of the Comptroller and Auditor-General and the Exchequer and Audit Department, and, second, from the fact that it inquires into specific matters.

There are, I think, two levels at which this House can control the Executive, if it will. The first is by the great debate on policy on the Floor of the House, and the second is by asking, through a Select Committee, the specific question—why do the Government expect to achieve their objectives by this means? In other words, it is to examine the adequacy of the proposed means to the proposed objectives, to query not the objectives but the means.

This is what the PAC does retrospectively and with hindsight, but it does not ask every such question. For example, it does not enter, in a general way, into the adequacy of the proposed means to a Department's total objectives. It limits itself to specific examples. It does not ask such questions prospectively at the time of action, at any rate where there is a new departure.

Parallel with the Public Accounts Committee, there is, of course, the Expenditure Committee, which has now presented the House with a number of valuable reports, and the House now has experience of the way in which the Expenditure Committee is working.

Perhaps I might quote the order of reference of the Expenditure Committee: To consider any papers on public expenditure presented to this House and such of the Estimates as may seem fit to the Committee and in particular to consider how if at all, the policies implied in the figures of expenditure and in the Estimates may be carried out more economically, and to examine the form of the papers and of the Estimates presented to this House. I should perhaps say that I informed the hon. Member for Walsall, South (Sir H. d'Avigdor-Goldsmid), the new Chairman of the Expenditure Committee, that I would be referring to that Committee. However, there is a meeting of the Committee at this moment and he asked me to present his apologies to the House; he did me the courtesy of saying that he would read what I said.

What I want to emphasise in the terms of reference of the Expenditure Committee is these words: …in particular to consider how, if at all, the policies implied in the figures of expenditure and in the Estimates may be carried out more economically. That is looking prospectively—a form of activity which is parallel to, closely resembles, what the PAC is intended to do retrospectively. But, of course, the Expenditure Committee is also concerned with policy, and its order of reference permits it so to be.

It does not have the assistance of the Comptroller and Auditor-General, and this might be a matter of debate—but it might be difficult, one can see, to have the Comptroller and Auditor-General working with a Committee which might use its information to query policy and not just means. Inevitably there is some overlap, or perhaps some complementarity, between the work of the PAC and that of the Expenditure Committee.

I should like to refer particularly to a very valuable report of the Trade and Industry Sub-Committee of the Expenditure Committee, "Public Money in the Private Sector". The Committee inquired retrospectively, as a basis presumably for the comments that it wished to make on future policy, into the RB211 affair and into assistance to the shipbuilding industry. Indeed, permanent secretaries were rushing hotfoot from one committee to the other to give evidence on what were not very dissimilar questions.

The question which arises out of this is whether the House is sure that, either directly or through Select Committees, we are prepared sufficiently to press these two specific questions on the Executive. First, is departmental administration adequate to its task? Second—this question to the Government—why do they think that this specific expenditure in industry which is now proposed will achieve their objective?

Of course, the PAC does in effect deal with the second of these questions where it is inquiring retrospectively into a continuing policy. Thus, for example, by what we have to say in these reports on the Covent Garden Authority, on the Sugar Board accounts, on the Atomic Energy Authority, on the new investigation we are now undertaking into the exploitation of North Sea gas and oil—by inquiring retrospectively, we say also something of what we think is the way policy should be administered in future. But where there is a new departure, this cannot operate, because this would be outside the Committee's terms of reference.

Is this sort of question to the Government—"Why do you think that this expenditure will achieve your objectives?"—a question for the Expenditure Committee which is a policy committee and may in this respect be handicapped from pressing that sort of question, apart from being handicapped by not having the assistance of the Exchequer and Audit Department? Is it a question for the PAC, with extended terms of reference, or is it a question for nobody in this House other than Ministers until the PAC inquires retrospectively into specific cases?

I am sure that the last thing that the PAC would want is to discourage initiative or flexibility or to instil a timid attitude which feared responsibility. It is in that connection that our remarks on Section 332 of the Companies Act were made. This was intended to be helpful to Government and I believe that it has been taken to be helpful.

I was glad to see these words on page 11 of the Treasury Minute: As regards Section 332, the Treasury and the Department of Trade and Industry fully accept the conclusions of the Committee. The Department are making a renewed examination of the implications of the Section and some notes of guidance have already been circulated to officials. I refer to that to emphasise once more that it is the wish of the PAC to be helpful in this area.

Nevertheless, the question arises whether the House is adequately prepared and set up, through the terms of reference of these Select Committees, to deal with the specific types of question to which I refer. I should like to mention some remarks made on the work of the PAC by a very experienced and senior official of Government, now retired, Sir Richard Clarke, who was Permanent Secretary to the Ministry of Technology and who has discussed the functions of the PAC in his series of lectures, "New Trends in Government", particularly on pages 12 and 13.

Sir Richard says, first, that there should be a regular report on the efficiency of a Department's financial procedures and on what is being done to get better value for money and, second, that permanent secretaries should be examined very searchingly on that report. That would, of course, be a departure for the PAC.

He says that the Exchequer and Audit Department should, of course, continue to inquire into specific faults and that accounting officers should continue to be examined by the PAC on these matters, but he adds this point, which again would be a departure from present practice: Specified officials would be designated as responsible for this purpose, just as, for some Votes now, the Accounting officer is a Second Permanent Secretary or Deputy Secretary". I believe that the intention of that recommendation is to put responsibility very clearly where it lies and to have the official responsible answer to the PAC.

Of course, when permanent secretaries appear before the PAC, they are supported by other officials, but what Sir Richard appears to be suggesting is the designation of specified officials as being responsible.

He then goes on to a point on which he has my full-hearted agreement and probably that of many hon. Members: In my opinion, the Executive is too strong in relation to Parliament rather than too weak. But I do believe that changes, both for supply procedure and for audit, could be devised which would both strengthen the substance of Parliamentary control (while abandoning the shadow) and make a larger impact on the efficiency of the Department's administration. These are important suggestions. I raise these matters not because I wish at present to propose solutions; that would be far outside my remit today. But there is here a problem to which consideration needs to be given. I hope that the House and the Government will consider this.

Mr. Dick Douglas (Clackmannan and East Stirlingshire)

I have been trying to follow closely the interesting trend of my right hon. Friend's remarks. Would he agree that what is necessary here is for the Expenditure Committee and the Public Accounts Committee to have before them, almost simultaneously, some idea of the public expenditure surveys of the Government?

Mr. Dell

I speak without full briefing on this matter, but the position of the Public Accounts Committee is that, through the Comptroller and Auditor-General, it has, in principle at any rate, access to the documents of the Government except the documents of the Treasury. I may be wrong about that. I would have to inquire into it. But certainly it always assists the operation of Select Committees of the House if they have access to relevant documents, and the document to which my hon. Friend has referred would be a very relevant document. But I am being more modest at present.

The Financial Secretary to the Treasury (Mr. Terence Higgins)

The right hon. Gentleman will excuse me for interrupting him, but I did not hear the precise word mentioned by the hon. Member for East Stirlingshire (Mr. Douglas), who was within a few feet of the right hon. Gentleman, in referring to a particular document. Would the right hon. Gentleman perhaps mention it?

Mr. Dell

Yes. My hon. Friend was suggesting that the Public Accounts Committee and the Expenditure Committee should have access to the Public Expenditure Survey.

I noticed in The Times two days ago that the announcement was made about the appointment of the Expenditure Committee and of the hon. Member for Walsall, South as Chairman of that Committee. The Reporter writes as follows: Sir Henry … knows that he has to give the committee the status of the Gladstonian Public Accounts Committee, which is more than 110 years old. I should like to say to the hon. Member for Walsall, South—in his absence—that if there is anything that the Public Accounts Committee can do to help the Expenditure Committee achieve a status comparable to our own, I hope that he will let us know. The status of the Public Accounts Committee comes not from its age but from its responsibilities and its direct relationship to accounting officers; age is not, however, always a disadvantage.

I have indicated to the House what I believe to be certain areas of concern in the control which the House now exercises over a particular part of Government expenditure. I have concentrated particularly on Government investment in industry. I hope that there will be careful thought as to whether it might not be appropriate, perhaps, following something like the lines of what Sir Richard Clarke proposed in "New Trends in Government", for the PAC's methods of inquiry to be adapted and to be deployed over a wider field, and prospectively as well as retrospectively.

4.44 p.m.

Mr. Peter Rees (Dover)

I did not have the privilege of being a member of the Public Accounts Committee, like the right hon. Member for Birkenhead (Mr. Dell), but I hope that I am allowed to compliment its members and those who helped them on their First, Second and Third Reports.

The points I shall make arise in particular from the Third Report. If one can single out any particular Votes, they are Votes 15 and 19. The theme I want to develop is to some extent the theme developed by the right hon. Gentleman—Government investment in industry. Indeed, as the right hon. Gentleman remarked, the report of the Public Accounts Committee is in a sense complementary to the excellent Sixth Report of the Public Expenditure Committee, published in July, which I regret we have not had an opportunity to debate in any depth.

Vote 15 relates to the assistance given by the Department of Trade and Industry to the shipbuilding industry. We learn that about £40 million was committed under the Shipbuilding Industry Act 1967, through the SIB, and that is beyond or before any sums that have been or will be committed to Govan Shipbuilders to get that company under way.

Vote 19 relates to the launching aid given from the Ministry of Aviation Supply, as it then was, to Rolls-Royce in connection with the RB 211 aero-engine, and that amounted to over £90 million. That is before any capital which the Government may have had to commit to get the new company off the ground. So we are talking about very sizeable sums of money. Both these examples—there are many other examples studded through the reports of the Public Accounts Committee—raise questions which I shall suggest to the House.

Are Governments, of whatever complexion, committing public money to commercial or semi-commercial projects in the right way? To put the question more crudely, perhaps, does the taxpayer get an adequate return, in commercial, strategic or social terms, on his money?

The problem is simple for both ends of the political spectrum. For those who believe in an unclouded, free market, there is no problem, as there should be no Government money committed. Equally, for those who believe in an entirely Marxist economy, there is no problem, for an entirely contrary reason. But for those of us—I suspect, with suitable diffidence, that we are to be found on both sides of the House—who have become reconciled to a mixed economy with varying degrees of emphasis, this is an acute problem and is likely to be a continuing problem.

The first question I suggest should be asked, even if no very clear answer will be forthcoming tonight, is, should public money be committed by a Department of State, or should it be committed through some para-governmental agency or—if the House will forgive me for using an unattractive word—through some "para-statal" agency?

Mr. Tam Dalyell (West Lothian)

On a point of order, Mr. Deputy Speaker. I hate to interrupt the hon. and learned Member for Dover (Mr. Peter Rees) but the fact is that at least one of us gave ample notice to the Department of Trade and Industry that we wished to raise the question of Rolls-Royce. The hon. and learned Member is asking some very important questions. Is it not strange that there is no DTI Minister on the Government Front Bench?

Mr. Deputy Speaker (Sir Robert Grant-Ferris)

That is not a point of order for the Chair.

Mr. Rees

I am very happy to see on the Front Bench my hon. Friend the Financial Secretary to the Treasury. I have no doubt that he will convey our remarks to the Department of Trade and Industry. I am not optimistic that we shall reach any very profound conclusions tonight. But it is right that that question should be aired, because this is likely to be a continuing debate, not only in this Parliament but in many Parliaments thereafter.

The problem was analysed with great lucidity and skill in the Sixth Report from the Expenditure Committee, to which I pay a further tribute. Perhaps not surprisingly, no very firm conclusion was reached, but it would be appropriate for me to quote the last paragraph: We make a final comment. The post-war period, and particularly the last ten to fifteen years, has seen both a vastly increased commitment of public funds to private industry and a growth in the complexities and risks involved. It is not surprising that Government and industry have stumbled from time to time. The need is not to attribute blame and encourage recriminations but to draw lessons from which all will ultimately benefit. It is a matter for conjecture, and for debate elsewhere, how much money should make its way to the private sector in the years ahead. It is beyond doubt, however, that the complexities associated with such investment will multiply. We hope that others, in Parliament and outside, will carry the discussions forward. With suitable diffidence, I hope, I shall endeavour to carry the discussion a little further forward, beyond the point at which the right hon. Member for Birkenhead left it, although I do not say that I shall necessarily contribute anything more striking to the debate.

The first question is, should we consider some kind of para-governmental agency, or should all public money be channelled through a Department of State, for whose activities a Minister is responsible in detail to us?

It was noticeable in the evidence given to the Public Expenditure Committee that the weight of Civil Service evidence—this is not surprising, perhaps—was for the channelling of public funds through a Department of State. By contrast, the weight of outside evidence was that such money would be best channelled through a para-governmental agency. It is inevitable that prejudices will creep through, and I need not go into detail as to why civil servants should prefer to see this money handled through the organs of Government in preference to a governmental agency. My preference is for a para-governmental agency for the reasons which have been widely canvassed in the report.

Mr. Dell

It is not for me to say how civil servants think on this issue but does the hon. and learned Member imagine that the replies of civil servants given to the Expenditure Committee are influenced by the decision, if any has been made, by the Government?

Mr. Rees

Perhaps I speak with rather less experience than the right hon. Gentleman. I have not had the privilege of cross-examining civil servants in detail and I do not know whether they speak from a departmental brief or whether they draw on experience gained over the years. I am not in a position, therefore, to answer the question. I should prefer to leave it as a matter for speculation. My reasons for prefering a para-governmental agency are that I genuinely feel that Government and the Civil Service have already a wide enough field of activity to cover. I doubt whether they can take on added responsibilities in their present forms. Then again, I am not certain whether the training of our civil servants, admirable though it may be, necessarily equips them for a detailed appraisal of commercial and quasi-commercial projects, or for the supervision of those projects.

So often when we come to consider in a moment of crisis whether Government money should be committed to such a project or not, there is a far-reaching debate and sensible conclusions may be reached. But one is left with the impression that after the money has been committed the pressure probably relaxes and the Minister concerned no longer has the time and the inclination to follow up what has happened to that money. The pressures perhaps build up in some other direction and he switches his attention elsewhere. We need therefore some kind of continuous supervision of what happens to the money. I do not say that we must continually breathe down the necks of the companies to which the money has been committed. That would be going too far. But a more sensitive form of supervision should be possible than perhaps can be exercised through a Government Department.

It is not enough to summon a little outside assistance, perhaps a distinguished firm of accountants or a merchant bank, to make a quick appraisal which will then be the basis of a departmental decision which Parliament could adopt. If decisions are made in that way there will always be, I suspect, a tendency for the Minister concerned to say, "Let us for heaven's sake give them slighly more than they require so that we shall not have to go back to the House and justify a second request for funds." I do not consider that to be a very sensible way in which to commit public money. The problem must be kept under constant review committing as much money as it required from time to time, and I believe that this would be achieved more easily through some kind of autonomous agency, even though ultimately it would be responsible to a Minister.

I wish to try to relate this debate to something we were discussing in the summer. I am a little gloomy about the experiment which has been foisted on us through the Industry Act. I do not believe that it is an adequate solution to give a Minister a sort of ad hoc advisory board in various parts of the country. We need a continuing body answerable to the Minister inevitably and ultimately, perhaps, because he will be appointing people to it, with access on a specified basis to public capital and able to act in a limited sphere on its own initiative and in a wider sphere on the initiative of the Minister. As for the precise financing of such an agency I doubt whether it is feasible to mix private and public capital in such a body. I suspect that any attempt to do so will lead to two sorts of capital being treated and accounted for on a different basis or both being subject to the standards of public accounting, which are perhaps not the most appropriate for a commercial or semi-commercial operation.

Hon. Members opposite may suggest that my conclusions are leading irresistibly back to some form of IRC. It may be that, with the wisdom of hindsight, we were overquick to disband the IRC and that we could have drawn lessons from its operation. I believe that the IRC was wrongly conceived and, without introducing a partisan note, that it was set up in a period when we had a Minister who was restlessly tinkering with British industry. I must declare my political commitment. Although I advocate a para-governmental agency, I do not envisage it as a midwife attending at the birth of new companies and restlessly arranging matches between existing companies. That would take it beyond the kind of responsibilities that I envisage, because it would lead to big decisions which are perhaps more properly taken by the market.

It is very difficult and improper for the Government and even for some kind of para-governmental agency to decide which two firms should link or to which kind of merger or reorganisation public money should be committed. That is a field of activity which is purely commercial and which should be left outside Government hands or control.

I come, therefore, to the question of how and where money should be committed. Such agencies should have the power to make loans or to subscribe for preferred or even ordinary share capital or debenture stock. I have no emotional antagonism to the acquisition by such an agency of ordinary share capital provided it is not a covert form of backdoor nationalisation. In fairness, all of us would recognise that we have not evolved a proper systematic method of controlling nationalised industries and therefore I do not want to see that side of the nation's activities enlarged and I do not want to see such an agency used as a backdoor nationaliser. Beyond that I have no reservations about it committing money by means of acquisition of share capital where appropriate.

The agency should have maximum commercial flexibility perhaps with the explicit reservation that it should be committed eventually to disposing of any shares it acquires in that way. I do not want to see it evolve as a sort of State-holding company, but beyond that it should have open to it all the methods available to a private merchant bank to finance industry. If such projects involve such an agency in putting members on the boards of private companies, so be it. That would be a perfectly logical step and must be one of the ways in which it could supervise investment in the private sector.

Mr. Dalyell

On the question of how such an agency or, indeed, a Government Department operates in relation to people in companies which have this relationship with the Government, would the hon. and learned Member care to give any views on the way that the DTI, rightly or wrongly, has weighed in very heavily on the question of senior management of Rolls-Royce and has denied to Mr. Ian Morrow his choice of a managing director?

Mr. Rees

I would not like to comment on the particular incident which the hon. Member raises, first, because I do not pretend to be in possession of all the facts and, secondly, because I do not know whether I see the Rolls-Royce situation necessarily developing by the means I am advocating at the moment. I do not mean that if there had been such a para-governmental agency we would have avoided the Rolls-Royce debâcle. The IRC was in existence, putting members on the board of Rolls-Royce during the critical period. But perhaps the question that the hon. Member is asking is going a little beyond my theme as to what rights of recourse members of individual boards should have. They have their rights of publicity and they have their contractual rights. I do not know whether beyond that that is a theme that I could legitimately develop in relation to the main theme I am trying to argue tonight. On another occasion I may be allowed to develop it with the hon. Member.

Mr. R. T. Paget (Northampton)

This is a problem of limited Government interference once it occurs. Does the hon. and learned Member know of any instance of a firm which has had to seek Government financial assistance of this sort and has then succeeded in surviving? Do they not always become casualties?

Mr. Rees

I do not know whether the hon. and learned Member will regard this as a fair answer, but I should have thought that British Petroleum was a good case. It did not seek Government assistance and the Government bought their way in for strategic reasons. Originally there was a majority Government holding which now is a large minority holding. I would have thought it was unfair to describe BP as a casualty. It is one of our more successful oil companies. The hon. and learned Member may not regard that as a fair example.

Mr. Paget

That was a case where we needed it, not one where it needed us.

Mr. Rees

In self-defence I must say that that is the reply I was inclined to give. Possibly we shall see when the Industry Act has worked itself out. But if the hon. and learned Member looks through the IRC's accounts he will see that sums of money were committed—and they were committed in a variety of ways, by loans, debenture stock, and so on. It would be unfair to the memory of the IRC to say that all these companies had become casualties. We tend to get a slightly highly-charged view in this House because we debate only the failures and not the successes, but there are successes and it would he fair to state that the IRC, lamented or not lamented, had its successes as well as its failures.

My final question concerns to what projects should money be committed. There are commercial projects for which the market is not adapted. Perhaps the scale is too big and the return likely to come over too long a period. That is the case where money could be committed, either on the initative of the agency or of the Minister, and the success or failure of that commitment could be judged by the harshest and most realistic of tests: has it worked out commercially? Even if we were not encouraged to debate in detail projects to which such an agency had committed funds, at least when the Public Accounts Committee came to review its activities we should have the simplest possible test by which to judge the success or failure of a purely commercial enterprise.

We could have socially and environmentally desirable projects with what I would describe as a commercial substratum. This calls to mind projects needed in the regions where unemployment is acute. This should be entirely on the initiative of the Minister, who should commit such projects for the consideration of such an agency, and if he instructed it to go through with such a project it should be made clear that he had instructed it to do so for social, Environmental or whatever noncommercial reason.

One of the great difficulties we always encounter is the blurring of the criteria when we come to consider such a project. Here, I do not wish to uncover old wounds, but I remain to be persuaded that Govan Shipbuilders should or would be justified by commercial criteria. There may be good social reasons why the company should be set up, but it has been justified by a rather specious commercial argument. I do not mean to criticise unduly the report of Hill Samuel, but it is possible for anyone to read between the lines. The report said that there was just a commercial case but that it was for the Government to justify their action on social and environmental grounds. If that is the case, I would much prefer the Government to say outright that this was a project which they commended on environmental or social grounds. Unless we know for sure what the project is designed to achieve, we cannot judge it in any meaningful sense. In those circumstances, we should be unable to arrive at any conclusions which would assist those involved or those who come after us.

Mr. Dalyell

What does the hon. and learned Member consider to be the possible damage of candour to exports?

Mr. Rees

That is a difficult question to answer. It may be that if Govan Shipbuilders produces the ships, they could be sold at a certain price, but that is not the point I am trying to make. The point is that we were supposed to have set up a viable commercial entity on the upper Clyde which could stand the test of real competition. I am trying to debate this subject in general terms without relating it too much to any particular project. The point of a debate like this is that we should clarify our minds as to how this kind of problem should be approached, not so much in relation to what happened in the past but for the future, so that we can lay down the kind of guidelines which enable us to have a meaningful debate and to reach meaningful conclusions, and enable the Public Accounts Committee to do its work more effectively.

Where there are projects of this kind that can be justified on social or environmental grounds, although they have commercial substrata, the Government must come out and say so. There is a dilemma here because if the people on the upper Clyde are told that they are not really a commercial entity it could, in stark terms, he extremely demoralising. But it is equally demoralising to ask people to spend their working lives in a company which consistently shows a loss.

There are also projects which will seem commercial in their nature but which are justified on strategic or defence grounds. This is the case, as I understood it, which was put forward for the resurrection of Rolls-Royce. Such cases must be judged by quite different criteria, and it is right for a Minister who commits such a project to a para-governmental agency to say that it is not primarily a commercial project but in the last analysis it must go through for strategic or defence reasons. It will then be possible to judge such a project by those criteria.

I have been able to sketch out only in very general terms some ideas on this difficult and continuing subject, helped very much by the very able reports of the Public Accounts Committee. But the Committee can at best carry out a skilled and relentless post mortem on the corpse presented to it. What we need is some hard, consistent and forward thinking on how any Government should commit public money to industrial and commercial projects, on how such projects should be judged and on how the money committed should be controlled. Finally, we need to build up in the House some coherent experience in this difficult field to inform our future debates.

5.10 p.m.

Mr. R. T. Paget (Northampton)

I join my right hon. Friend the Member for Birkenhead (Mr. Dell) in what he said about my right hon. Friend the Member for Manchester, Cheetham (Mr. Harold Lever). We all greatly regret his absence and send him the very best of wishes for his early return. I probably speak for all of us on both sides if I say how stimulating it was to sit and watch the bubbling and amusing fertility of his mind. He made that Committee into something the meetings of which we looked forward to and we shall miss him tremendously while he is absent.

As deputy chairman of the Committee, I should like to express my thanks for the various professional assistance which we received. A committee is useless without professional assistance. We must not minimise the professional assistance that a committee system requires. I am a profound believer in the committee system. The House is far better in committee than it is on the Floor of the House. It gets down to work; it forgets about being partisan and becomes interested in a subject. I wish that we had more Select Committees to initiate legislation and not merely to discuss existing legislation.

We once had a Select Committe which was equipped with a professional parliamentary committee from the Service Departments and the Treasury which drafted and provided us with the Army Act. That Act was accepted without amendment either by the House or by the Government. Since the example of that remarkable success in complicated and long-overdue legislation, the procedure has never been repeated. I can never understand why.

There is, for instance, a great call for legislation on aliens and nationality. A more ideal subject to hand over to a Select Committee to find an agreed solution and to put into shape I cannot imagine. I have pressed for years for this to happen. Perhaps the time will come when it will, but I am not sure that this is the right moment to call for it.

Since I have been on the Committee I have been impressed by its effectiveness and the influence which by its existence it has on Parliament, not merely through the Government and through the House. The fact that the Committee is there and that people must sort out their ideas when they come before it is important, and it works.

I intend to speak shortly on the report and to deal with the subject which has been raised by the hon. and learned Member for Dover (Mr. Peter Rees). There are three headings which broadly cover the intervention by Government in what is broadly described as sick industry, or industry that looks like getting sick. There is shipbuilding, which involved the payment of £l3 million to Harland and Wolff, the greater part of which went in paying off existing losses rather than providing for the re-equipment of the industry. There is the Rolls-Royce story. I feel a certain sympathy with Rolls-Royce. The engine which the company achieved and is achieving now is a notable one. I am thankful that we took it over. When one compares it as a useful contribution with Concorde, that "daddy" of disasters, it is hard to blame Rolls-Royce. The final, and perhaps most interesting project, which was wholly unsuccessful, was the Beagle.

I will read out a passage from the Treasury Minute which shows such an astonishing somersault by the Government after what we heard at the election that I can receive it only with applause and appreciation. I thought that the Government were wrong then. They now think they were wrong, and they have reversed the decision. That is good; we must not grumble. On page 6 the Treasury Minute says: The Treasury and the Department of Trade and Industry agree that further assistance from public funds should be used as effectively as possible for the development of a viable shipbuiding industry. But at the same time one of the purposes of Government assistance to industry is to support employment. As most shipbuilders are major employers in assisted areas where the level of unemployment is causing continuing concern, it may also be necessary to take wider regional and employment considerations into account when considering any further assistance to industry. Those are words which I applaud.

It is important that we should realise that profitability is not the only criterion. Those who provide a service other than that of earning profits should not be spat upon because they are not earning profits. It is not disgraceful not to earn profits if it is made clear that that is not part of one's job.

That applies to directly nationalised industries. For instance, when directly nationalised industries are told that they must not put up their prices as would a commercial concern, it should be made clear that that compliance with Government policy is a service to be charged to Government. The cost should be put in the accounts and debited to the Government. That is the only way in which it can be made clear.

Equally, with partially assisted industries a major effort should be made to distinguish the expenses involved in com- plying with Government policy to provide employment in a particular area were it is not commercially feasible to do so, or to take on contracts at a price which is not commercially viable to provide employment in an area in which it is Government policy for employment to be provided. The cost of underestimating, or whatever it may be, should be charged to the Government. It should be made clear that the commercial price for the job is so much and if the Government introduce additional factors the Government should be charged with the difference between the commercial price and the actual price which is charged. I believe that it is important that this should be distinguished, and it is certainly important to the morale and feeling in industry that it should be.

Similarly, I think that the other point which emerges from these experiences is the difficulty of limiting liability once the Government start to support an industry for Government purposes. One case is that of shipbuilding, with a limited support to improve the efficiency of the yards, and that capital support soon sunk by simple financial losses. In the Rolls-Royce case, we had what was termed a "launching liability" but it cannot apply to launching only. It goes on and we reach the position that we reached with Rolls-Royce. The Beagle experience is another example. The Government interest in that company was such that reasonable creditors could only regard Beagle as being the Government's and they let the Government take the decision. Law or no law, the Government had to pay Beagle's debts. That was the view taken. I think that the Government were right to take their decision in that case but they must recognise what flows from the line they take.

On this aspect, paragraph 96 of the Third Report is of interest. It says: The Treasury Minute records that the existence of a Government shareholding in a company registered with limited liability under the Companies Act does not of itself alter the legal rights and duties of shareholders, or of the Board, its officers and the company itself, or of third parties having dealings with the company; It just is not true in practice. If one knows that the sole shareholders in a company are the Government and one does business with that company, one expects them to exclude their credit. The creditors thought so and any reasonable man would. Indeed, if the Government really tried to exclude their credit, they would find that the finance they were providing would become more expensive. That would not make sense.

Therefore, I think that we should rather get away from the idea that in this sort of case one can really limit the liability once the Government have gone in. if the Government are going to accept liability, then I think that they must also accept the responsibility for managing, for which they are going to become liable. I think that probably the new Rolls-Royce type of structure may be the answer. Where the Government find a company in a position in which it can no longer carry on unless the Government provide the money, it is probably wise to say that the Government will also provide the directors. But at this point, if the Government want to put in their own directors, they need to have proper control, to know where they stand, and what they are going to do.

I believe that more and more we shall find it very difficult to find a compromise between these two positions. I hope that we shall not be compromised on the issue by a partisan attitude either way towards nationalisation. "Nationalisation" has become an emotive word which really means nothing much else than an emotive word. I am not a nationaliser or an anti-nationaliser. I believe that nationalisation is one of the many instruments of economic organisation available, desirable in some cases and not in others, taking all kinds of different form. Sometimes it is the right solution and sometimes the wrong one. There are different forms of control, depending on circumstances. I hope that we shall be able to judge things on their merits and realise that limited involvement at the point where Government support becomes necessary is not in practice a viable proceeding.

These are the only short points I want to make. In the next Session, the new Committee will be heavily involved in what is perhaps the most important issue which the Public Accounts Committee has ever had to look into—the management of North Sea gas and oil. I think that it will be a very interesting session for the Committee.

Mr. Peter Rees

Would the hon. and learned Gentleman extend his proposition to all forms of Government commitment, whether it be by minority shareholding, debenture stock or loan? Surely he would not want to extend it to any situation where there is Government money in a company?

Mr. Paget

I am not saying that it should always be done but we have to realise that very often a limited commitment is simply not available to the Government, that once they have taken the decision it has to be maintained for public reasons. In those circumstances, the Government find it more and more difficult to limit the extent to which that maintenance has to be held. That, I think, is the difficulty.

5.26 p.m.

Mr. Martin Maddan (Hove)

I apologise for not being here at the beginning of the debate, and I am sorry that I missed the speech of the right hon. Member for Birkenhead (Mr. Dell). I echo what has been said about the right hon. Member for Manchester, Cheetham (Mr. Harold Lever). I joined the Public Accounts Committee late in the last Session. I found the meetings not only useful and interesting but also agreeable, and that is a very happy position for an hon. Member to be in.

I think that the most important thing which the committee discussed in the last Session was the very point we have been concentrating our attention on today. It is a most difficult point. We see in our report questions about Section 332 of the Companies Act and the responsibilities of directors not to be engaged in fraudulent trading; and the linking of that aspect, if there are Government directors, with information which the Government might have. It might seem that all this was extremely technical. It was extremely fundamental—rather like the filioque clause in the Creed. In the end, that one word split Christendom and the result 1,500 years later is still with us. In this technical matter of the responsibility of directors appointed by the Government when the Government are providing money, and of the view which creditors take of the company, we see the dilemma which faces the whole of the community in the question not only of a mixed economy but of mixed companies.

I have some sympathy with the view just propounded that if one is in for a penny one is in for a £ and there may be no half-way house. That does not mean to say that every time the Government decide to take an interest in something it has to be nationalised in the old, steam style like the railways or the coal industry. If an equity base can be maintained, with the Government owning the whole—we have the Rolls-Royce case in this respect—that is a much more flexible means, it seems to me, for the capital structure of a company.

In paragraph 97 of the Third Report the Committee noted that the Department of Trade and Industry attached great importance to making clear when the Government took an interest the extent of their involvement. I think that what has just been said focuses upon the question whether in practical terms that is a possibility. I do not want to say that it is not. We are in a position in which any hon. Member would be very bold to be too dogmatic about anything in this sector. We have to study, to learn and to experiment. But I would not like to see a position, although I recognise all the difficulties, in which the Government could not give some help to a firm because they feared that if they once gave a penny there would be no stop to the number of £s.

If one regards the Government as a kind of merchant bank, they can go in for a certain amount and after that they can stop. But if they do that—and this is one of the lessons of Beagle—they must make clear from the start what they are doing, so that creditors and others concerned know what the Government are doing and if they misread the signs that is their look-out. There has been a lack of clearness in the past and assumptions have been made—again, Beagle is a good example. Assumptions were made in that case which, although in the letter of the law were not right, were nevertheless right in general practice. The last Government acknowledged the position and I am glad they did. So here we have an example where the conflict between Government capital being involved and a limited liability is clear. The conflict must be resolved by better definition of the Government's involvement if there is to be a limited Government commitment in a limited liability company.

But there is the other point to which the Committee refers in paragraph 100—the position of Government directors on the question of reckless trading and their consenting to reckless trading. A director must not only consent to it to be in breach of the Act—I have had various lessons read to me by colleagues on this, and I think that I now understand the position; he has not only to be involved in reckless trading to be in breach of Section 332 of the Companies Act, but he must do so knowingly. The Government, of course, perhaps the major provider of funds in a company, must keep on informing themselves, and can do so much more readily than an ordinary shareholder perhaps with a minority interest would ever dream of doing or be able to do.

Mr. Paget

But the Government very often provide the finance precisely because they know the company is insolvent.

Mr. Maddan

That puts in a nutshell the whole dilemma, which leads me to my second point—that if the Government are doing this because they know that in an ordinary commercial sense to go on trading is not a sound commercial proposition, they may, as my hon. and learned Friend the Member for Dover (Mr. Peter Rees) said, in some sense have to say so, because if they do not say so the position of the company and of the creditors becomes ambiguous and liable to many difficulties.

Mr. Paget

So does the Government's position.

Mr. Maddan

We must find a formula. It could be found through the Public Accounts Committee, but perhaps that Committee has had its innings on the matter. It could be through further examination by the Government or by examination by a special Select Committee. The subject of Government involvement in industry is not of minor importance. I hope that we shall find a formula that is spared the overtones of party politics. It will have to be one that makes clear to all concerned, if the Government are taking an interest in a limited liability company, what the limit of their interest will be. I hope that the Government will then have the principle to stick to that and not throw good money after bad, if they have gone into the company on a commercial basis—and they may sometimes have to do this because they may sometimes be the only banker a company can have.

But if the Government have gone into a company on a non-commercial basis because of trouble of a different sort, a different situation arises, and the position of Government directors is extremely difficult unless the Government have made it clear that in those cases they are in up to their necks and without limit.

Therefore, there are two distinct cases. One, is where there is a commercial reason and the Government are acting as a banker because for some reason other sources of finance will not fulfil that rôle. It is then a matter of making clear the limit of the Government's commitment. The other type of case is where the Government are really in for a virtually unlimited liability. There the whole relationship of the Government to the company and its management must undergo a radical change.

I do not believe that any of us has the whole matter straight. I do not believe that we shall get it right in one go, or for every circumstance for all time. An immense amount of thought, discussion and debate must take place on the subject, if there is to be confidence in the trading community and in those working in companies receiving Government assistance, and if the taxpayer, whose money is being used, is to be confident that it is being used in a sensible way in the circumstances of the case. Therefore, I found it very instructive to be able to take part in the end of the proceedings of the Committee. I felt that we were at the beginning of a very important argument rather than at the end. Although the Public Accounts Committee has in a sense now laid down that topic I hope very much that it will be taken up elsewhere.

5.39 p.m.

Mr. Tam Dalyell (West Lothian)

The hon. Member for Hove (Mr. Maddan) will forgive me if I do not deal with his theology or his formulae, or indeed the rest of his interesting speech, the more interesting because it was mostly impromptu.

I join in the general good wishes to my right hon. Friend the Member for Manchester, Cheetham (Mr. Harold Lever), the Chairman of the Public Accounts Committee. I served under three chairmen of the Committee, my right hon. Friend the Member for Huyton (Mr. Harold Wilson), then my right hon. Friend the Member for Sowerby (Mr. Houghton) and subsequently the former right hon. Member for Kingston-upon-Thames, now Lord Boyd-Carpenter, and I know how a chairman of the Committee can impose his own personality for good or bad on the Committee and the amount of productive work that it gets through. I hope that my right hon. Friend the Member for Cheetham, who has gone home now, will soon return to us, and I send him good wishes.

Precisely because I am not a member of the Committee now and some of my hon. Friends and Conservative Members present are, I should like to say something else. The House often seriously underrates the amount of work a small number of our colleagues do in the committees, and they do not receive the public credit that they should. If the work is done properly, it is a hard slog. There is a great deal to read. Therefore, I find it a little strange that no Minister from the Department of Trade and Industry has been present so far.

I am grateful to the Under-Secretary of State for Home Affairs and Agriculture, Scottish Office, for coming. As the Financial Secretary to the Treasury and I have spent a considerable part of the past nine months, both upstairs in committee and on the Floor of the House, listening to each other on the Finance Bill, he knows that I have a high personal regard for him, and do not complain that he is the Minister who is to answer the debate. But that is not the argument. The argument is that it was obvious from the report that major matters concerning the Department of Trade and Industry were involved. It is not as though there were not quite a number of Ministers in the Department. There is a whole Roman cohort of them. Moreover, I, and I suspect others, warned the private office of the new Secretary of State for Trade and Industry that we should raise certain specific matters.

It may be that the Under-Secretary of State for Aerospace and Shipping is at Cape Kennedy and that the Minister for Aerospace is in California, but there are others. I intervened in the speech of the hon. and learned Member for Dover (Mr. Peter Rees). If I were he, I should be complaining at my party meeting—or is it the 1922 Committee?—that there were not Ministers on the Front Bench to hear my valuable speech. All of us are a little embarrassed at having to take the attitude, "Why wasn't the Minister here to hear me?", so perhaps I can say it more easily than the hon. and learned Gentleman.

When hon. Members have taken a great deal of trouble, as do the Comptroller and Auditor-General and those who work for them, there is a substantial case for saying that at least the Departments most involved should be represented on the Front Bench for what is a comparatively short time. I shall leave that subject simply with the reflection that I wonder what better things the rest of the Department's Ministers have to do. I should like to be told precisely what engagements for each of those Ministers is more important, granted that two of them are abroad, doubtless for good reasons. What more important have they do do than to attend for five hours to hear hon. Members who have done a great deal of work? I can say that more easily because I am not a member of the Committee.

I have given notice that I should like to raise three separate issues. The first concerns Rolls-Royce. I have two questions here, the first concerning paragraph 22 of the report, which says: The real trouble was not so much the escalation of development costs as the rise in production costs, due to the need to incorporate modifications, and the liability for penalties for late deliveries, which meant that the company was going to make a loss on every production engine. Until a fairly late stage in the project the Ministry had restricted their technical monitoring to the development programme to which launching aid specifically related, and the possible repercussions on production of delays in development were not being examined. I do not want to reminisce, but on the PAC I went through the whole Bloodhound saga. One of the things that came quite clearly out of that was that it is all very well to talk about technical monitoring provided we have the technical cost officers. But it should be understood that the cost of having technical cost officers monitoring what is done by a major firm, such as Ferranti, Bristol, Rolls-Royce, is in itself considerable.

Do the Government think that it is fair of the Committee to say—and it seems to be accepted in the Government report—that there should be more monitoring? If so, what are the consequences for the technical service at the Government's disposal? In particular, is it now a fact that the shortage of technical cost officers, which was very serious two years ago, has somehow been made up? If we want monitoring, we must have the means to do it. I question whether Government Departments have the means to do it on the scale suggested.

Mr. Dell

It is not for me to say what individual members of the Committee might have thought to be appropriate in this case, but my hon. Friend will have observed that its conclusion, at paragraph 26, is rather different and in a way more modest, being that as far as possible the Department of Trade and Industry should establish that the company will be capable of carrying out the project and taking its own part of the risk, and that the company's general management organisation is sound and good. It stresses the importance of trying to establish the potential cost which might fall on the company. In other words, although reporting what had been said to it in evidence, the Committee came to a perhaps more modest conclusion about what the actual possibilities in such a case were.

Mr. Dalyell

I take the point. I think that my right hon. Friend will agree that one of the things about the Committee, something that perhaps gives it authority, is that its conclusions are always stated extremely modestly. I have thought that perhaps it was the modest language that rather clouded the Committee's will in the matter. But I take my right hon. Friend's point, and I am glad to hear it.

I turn to paragraph 26 for my second point. If we are to do as recommended in the paragraph, we must be concerned about the relationship between Government and senior personnel in a company. Therefore, I refer to HANSARD of 4th December, beginning with Question No.

19 asked by the hon. Member for Derbyshire, South-East (Mr. Rost), who has had a continuous interest in Rolls-Royce. He asked: Is my hon. Friend aware that even the auditors of the accounts admitted that they were unrealistic as the payments for the assets acquired nearly two years ago have still not been made, that a suspense account exists on the accounts for £77 million towards such payment? Why was the hearing of the independent assessor again deferred? After his hon. Friend the Under-Secretary of State for Trade and Industry had replied, I asked: Why was not confidence shown in the independent assessor? I received a somewhat tart reply from the Under-Secretary: I do not know what on earth the hon. Gentleman is talking about."—[OFFICIAL REPORT, 4th December, 1972; Vol. 847, c. 896–7.] Having regard to all the water that has gone under the bridges, he must have had a clear idea of precisely what I was talking about. Therefore, I ask whether the Government have had any more thoughts on the question of the independent assessor.

I turn to Questions Nos. 37 and 44 asked on the same day. In Written Question No. 44, I asked the Secretary of State for Trade and Industry: for what reasons he resisted the request of Mr. Ian Morrow in September and October, 1972, that Mr. Ronald G. Hooker should be given a senior position in the changed management structure of Rolls-Royce; and on what criteria his Department intervenes in the choice of people for positions in Rolls-Royce 1971 Ltd. The reply by the Under-Secretary was: I do not think it would be right for me to answer any question asking why any particular person has not been appointed to any post, or to comment on allegations about such matters."—[OFFICIAL REPORT, 4th December, 1972; Vol. 847, c. 288–9.] I do not wish to cause trouble over this matter. I do not wish to be personally malicious to any individual. There is a public issue involved concerning precisely to what extent the Department and the Civil Service interfere with the choice of people for a company which has the relationship that Rolls-Royce now has with the Government. I would have thought the time had come to ask this question, and to get a serious reply, as to the basis on which civil servants advise Ministers and on what basis Ministers, on Civil Service advice, choose people who are to hold supremo posts.

For a Government to say to a chairman "You will not have X, Y or Z as a managing director" involves an interference by the State such as we have not had in this field before. It may be justified. At least Parliament should be told of the basis on which the Government are thinking.

The second issue of which I gave notice concerns the Under-Secretary of State. I would ask for any information on the latest developments concerning what one might call the saga of the Nine Wells Hospital, Dundee. I am glad my hon. Friend the Member for Dundee, West (Mr. Doig) is present because he knows a great deal about the Nine Wells Hospital. What is the latest information that can be given on the rising costs of Nine Wells? I ask that question for a particular reason. Perhaps the next major general hospital in Scotland is to be built at the new town of Livingston in my constituency.

I should like it to be known clearly that out of the Nine Wells situation some lessons have been learnt. I ask this question not to cause trouble. It is simply that it would be intolerable after all that the Public Accounts Committee has said about the management of hospitals in Scotland, not only this year but on previous occasions, if some lessons for the good of the public were not learnt. For example, has anything been learnt about standardisation? What has been learnt about cost control?

The Government reply is: In Scotland, the Scottish Home and Health Department consider that the maintenance of sound financial control standards will be assisted by the new single-tier board structure, enacted in the National Health Service (Scotland) Act 1972 which should facilitate the development of an improved finance staffing structure headed by the designated treasurer of each board. Pending the reorganisation of the National Health Service the departments will not relax their efforts to see that the present hospital authorities obtain value for the money they spend. In its modest way the Public Accounts Committee was critical. That seemed to me to be a somewhat watery reply which the Government gave to the strictures of the PAC. The PAC said at paragraph 32: In reply to a parallel inquiry by the Comptroller and Auditor General, following visits by his officers to ten hospitals in Scotland, during the two years ended June 1971, the Scottish Home and Health Department admitted that at six of the ten Boards of Management he overall standard of financial control had been for some time less than satisfactory, largely on account of staffing problems. Have those staffing problems been put right? Since the PAC says this with regard to six out of 10 cases the Treasury, to put it mildly, must have some thoughts on it.

Whereas many of us have been sympathetic to the very real problems of hospital building, the Nine Wells situation seems to many of us to have got absolutely out of hand. It is all very well crying over spilt milk. My concern is that this shall not happen again. Therefore I hope that the Treasury has some kind of brief from the Scottish Office to see how future general hospitals, and in particular the general hospital at Livingston, will avoid some of the mistakes that happened at Nine Wells.

My last point concerns the PACs statement on nuclear energy and particularly what was said about the fast reactor. Paragraph 49 says: The remaining system under development by the Authority is the Fast Reactor system. It then sets out the history and it goes on to say: Assessments have been made from time to time of the economic benefits to be expected from the Fast Reactor System, but these have produced widely differing results. As an example Your Committee noted that whereas the Authority had estimated the economic benefit expected from the Fast Reactor at between £1,300 million and £1,500 million, a subsequent study by a Joint Study Steering Group, on which the generating boards and the design and construction companies were represented, had estimated the benefit at only £220 million. The Authority attributed the differences in analyses of economic benefit mainly to the difficulty of making reliable forecasts of the costs of alternative fuels in 15 or 20 years' time and of the size of the nuclear programme likely to be installed over the next 15 years. They explained that the earlier assessments would in any case be superseded by the results of a comprehensive review of Fast Reactor developments being undertaken by the Department of Trade and Industry in parallel with the review previously mentioned. It would be a fair conclusion that this is a somewhat optimistic report compared to that which appeared on 25th November on the front page of the Scotsman signed by Maurice Baggott. I wonder how that report ever was highlighted. I have told the Department that I think this report, from all that has been said by Sir John Hill and others, has very little foundation. I said that to the Department because mud, once thrown, tends to stick. There should be some kind of a proper denial or comment on Maurice Baggott's report because if this is allowed to go uncontradicted, as has happened so far as many people are concerned, it is extremely damaging to what many of us, who have visited Dounreay three times, would think is a very worthwhile experiment. Therefore, I gave notice to the Department. That is one of the reasons why I am sad there is no Minister from the Department of Trade and Industry present.

I should like to comment on four of Mr. Baggott's statements. His first comment was that a sodium-cooled reactor was not possible within present engineering know-how.

Mr. Higgins

I am not entirely clear as to the relationship of this report to the PAC report.

Mr. Dalyell

In the PAC report there was a full discussion of the fast breeder system at paragraphs 49, 50 and 51. One of the difficulties about this report is that evidence was taken and, similar to last year's Bradshaw, a good deal may be out of date. On this matter I am trying to be as helpful to the AEA as possible, because this report did appear; it was quoted in the foreign Press. The PAC report gives the Government an opportunity to state what their view is of a system that is of vital importance to Scotland. Therefore, I relate it to paragraphs 49, 50 and 51.

The second point on which I would wish to comment is the following: The decision to close Dounreay will have to come from the Government; but it is almost inevitable now that the engineers attached to the Government have given it the thumbs-down. I do not believe that for a moment but I should like a clear statement that there is no chance of that happening. The article continues: However, nuclear scientists now believe that should the core be increased to commercial size there would be virtually no way of controlling reaction. This is the fourth point: The 250-megawatt prototype, costing £25 million, was expected to be generating power for the grid on a fully operational basis by the end of this year. These statements appeared on the front page of a reputable newspaper. Presumably there was some discussion in the newspaper office before what was, frankly, a damaging article to Scottish industry ever got on to the front page, and therefore it is right—and today's debate gives us the opportunity—to have a full denial of the report that was put out.

The Secretary of State for Scotland (Mr. Gorden Campbell)

As the hon. Gentleman knows, I have only just come into the Chamber, but another Scottish Minister was present. I think that the hon Gentleman has been talking about the fast-breeder reactor at Dounreay—

Mr. Dalyell

Yes.

Mr. Campbell

—and the Press report which appeared somewhat dramatically about three weeks ago. Perhaps I may tell the hon. Gentleman that the Atomic Energy Authority denied this very soon afterwards.

Mr. Dalyell

I am aware of that but, whether we like it or not, the original report, not least in the foreign Press, received a great deal more publicity—as often happens—than the denial. I therefore thought it right, having given notice to the Department of Trade and Industry, that specific points should be denied by the Government Front Bench tonight. As will be borne out in the notice that I gave to the office of the Secretary of State for Trade and Industry, I do not believe the report which appeared in the Press, but what I am saying is that because of the widespread publicity which the report has received it seems worth the time of the House of Commons denying it, and denying it in some detail; and that is why I gave notice.

I hope that the fast-breeder reactor system will be seen as long term and viable, even in a country that may be surrounded by North Sea oil and gas. These resources are finite. We went over all this in the Scottish Committee. My hope is that in the light of what the PAC said, and in the light of its report, the Government will take the opportunity to- night to express confidence in the fast-breeder reactor system.

6.2 p.m.

Mr. Stephen Hastings (Mid-Bedfordshire)

I rise to make a comparatively narrow point and therefore I hope that the hon. Member for West Lothian (Mr. Dalyell) will forgive me if I do not follow him far into a speech which I found interesting but on much of which I am not sufficiently informed to make any reliable comment. There was, however, one thing that he said at the beginning with which I wholly agree.

The hon. Gentleman drew the attention of the House to the great amount of work that is done by the PAC and other Select Committees which is not generally appreciated, perhaps even in this place, and certainly not outside. I know the hon. Gentleman from the past as a diligent committee man. I served with him for some time on the Select Committee on Science and Technology and can bear witness to that. I am sure he is right, and I hope that these debates will do something to emphasise the great volume of useful work that is done in this way. It is a part of government without which we would be vastly poorer.

I have to declare a clear interest since I intend to allude briefly to those paragraphs in the report which bear on the Sugar Board, 52 to 59, and to paragraphs in the Treasury Minute which refer to them. I am retained as a consultant to Tate and Lyle, not on matters dealt with in this report but simply on European affairs. Nevertheless, my interest is an obvious one and I should declare it at the outset.

The point that I have to make is brief, and I hope that the House will agree that it is fair. Any independent witness reading these paragraphs would, I am sure, agree that they imply a quite serious criticism of the present method of refining sugar in this country. That criticism centres on the private side of the industry, and particularly on Tate and Lyle as the biggest unit in the sector.

I should like to point out to the PAC, to the House and to my hon. Friend the Financial Secretary that although I agree that if I had been a member of the PAC presented simply with the evidence as it appears in the report, I might well have agreed with the conclusion that is drawn, nevertheless I do not regard that evidence as presenting anything like a full picture. The reason is that the private companies were never summoned and that what emerged was to some extent one-sided.

The criticism turns on the supposed extra cost of tranporting raw beet sugar to cane refineries where it is refined by Tate and Lyle, rather than its being refined by the British Sugar Corporation in what is known in the business as "white ends" to its existing plants—and that means extra investment not mentioned in the report—nearer to the beet areas.

I contend that the costing of the Comptroller and Auditor-General would be challenged by Tate and Lyle, and I should like to make three brief points in that connection. It is significantly cheaper to truck raw sugar, to transport it in bulk in open lorries from the main beet-growing areas, which are predominantly in East Anglia, to areas of main population densities, such as Liverpool, Glasgow and London where the main refineries exist and to distribute refined packets of sugar from there than it is to distribute refined packets from the beet areas. I do not think that that was taken into consideration.

Secondly, London and Liverpool are respectively the largest and third largest refineries in the world. They enjoy considerable economies of scale and as a result of good labour practices they are enabled to maintain continuous working. No responsible body has ever questioned their efficiency before, and a deep knowledge of what goes on there is necessary before criticism of the kind implied here could be justified.

Thirdly, it is obvious that the cane refineries already exist and that to abandon them would be to waste important national resources. As I have already said, the PAC's cost comparison makes no mention of the cost of fresh investment in different parts of the country, in the beet-growing areas for instance, which would be necessary if such a transfer of refining capacity were to take place. Nor does it make any reference to the cost in human terms of the redundancies which would result in acute unemployment areas such as Merseyside and Clydeside, which could scarcely be balanced by an improvement in job opportunities in an area such as East Anglia where comparatively full employment already exists.

Those three points seem to me to be deeply relevant to the evidence and to the conclusion reached by the Committee. They were not brought out, and they are typical examples of the sort of argument that can emerge only if all sides of the industry are enabled to put their point of view.

There is a good deal more that could be said but, as my hon. Friend the Financial Secretary knows—and the PAC evidence refers to it—there is an inquiry in process on the future shape of the sugar refining industry—the so-called Cyriax inquiry—commissioned by the Ministry of Agriculture and the various refining companies, and I dare say that when he replies my hon. Friend may feel that he is restricted in his comments on this passage of the report because of this inquiry. But I must draw attention to a passage in the Treasury Minute which was also referred to by the right hon. Member for Birkenhead (Mr. Dell). It reads as follows: The production of raw sugar from beet by the British Sugar Corporation is one of the issues under consideration and full account will be taken of the Committee's view that there is a clear need to ensure that sugar is puroduced by the most efficient methods. The right hon. Member for Birkenhead asked: What does that mean? I ask the same. It seems to me that the inference from that passage in the Treasury Minute could well be that in some sense the Government agree with the criticism in the Public Accounts Committee's Report. I ask my hon. Friend to beware of any such thing, since it is based upon evidence predominantly from only one side of the industry.

My hope is that when the Cyriax inquiry is complete and, happily, agreement is reached among the various sectors of the industry on how to proceed, the Public Accounts Committee will return to the subject of sugar and the refining industry, but that, when it does so—this is my earnest request—it will take into account not simply the Department's view but that of the very large responsible and efficient private sector as well.

I see no objection to that whatever. Indeed, only when that is done, it seems to me, will it be possible to reach a balanced conclusion. It is my contention now that that is not the case from the evidence as produced in this report, nor in the conclusion which flows from it.

6.11 p.m.

Mr. Dick Douglas (Clackmannan and East Stirlingshire)

I join all those right hon. and hon. Members on both sides who have expressed deep regret at the absence today of the Chairman of the Public Accounts Committee, my right hon. Friend the Member for Manchester, Cheetham (Mr. Harold Lever). I too, though a comparatively new member of the Committee, have benefited by watching him in action as Chairman. I very much hope, as the whole House does, that he will speedily return to health and to his activities in this place.

I shall direct attention to those parts of the Committee's Report which deal with the shipbuilding industry, with particular reference to the working of the Shipbuilding Industry Act. I shall refer to the subvention—I use the word loosely—given to the shipbuilding industry on the Clyde, and on the Upper Clyde in particular. It is worth emphasising that there are many shipbuilding yards on the Clyde, and in the main the ones which have been in difficulty have been associated with the consortium called Upper Clyde Shipbuilders.

There is a sharp distinction between the activities prevailing there and those prevailing in Scott Lithgow on the Lower Clyde and, happily now, those prevailing at Yarrow Shipbuilders. For the benefit of the House and the benefit of the industry, that distinction ought to be made clear. I have had a long association with Mr. Archie Gilchrist and, naturally, I wish him and the others well in Govan Shipbuilders, but it was an unhappy prospect—this point is made in the Committee's Report and in the Treasury Minute—to see that, after 20 years, very little change had occurred. In other words, millions of pounds of public money have been poured into this concern but with little capital development resulting.

As the minute indicates, there are other reasons for the subvention to the shipbuilding industry, for instance unemployment reasons, but if we are to build a viable shipbuilding industry, massive capital development is necessary. I contrast my experience at Govan Shipbuilders with my experience at Harland & Wolff at Belfast. Mr. Hoppe has had many difficulties to overcome, not the least of them being the present unhappy situation in Northern Ireland, but when one visits that yard one can see real prospects of its being capable, in terms of capital development and prospective capital development of matching the best shipbuilding yards in Europe, if not in the world.

In paragraph 12 of our Third Report, we make the point that the Department had learned that it was important to pay attention to management and manpower as well as money. If the Government will pay attention to management and manpower as well as money, the attitude of the Department of Trade and Industry is of considerable importance. I am not at this point complaining about the absence of a Minister from the Department of Trade and Industry, although my hon. Friend the Member for West Lothian (Mr. Dalyell) was right to do so since he had a matter of concern to the Department to raise. I am concerned about the attitude of the civil servants and of Ministers towards this industry, which is of supreme importance.

I was therefore disturbed to read what one of the civil servants was reported to have said on his return from a visit to Japan. I quote here from Lloyd's List of 27th November, which reports this gentleman as having said that Japan could build only simple ships. The article goes on to say: At present, he added, Japan did not compete at all in world markets with smaller, more specialised, ships and he indicated, as I say, that Japan was at present capable of building only simple ships.

Admittedly, there is an indication in the report that Japan might move to more complex vessels in the future, but that is not an expression of attitude which I want to see coming from a civil servant who is responsible, under the Minister, for the well-being of our industry. It is a most important industry. It is not—if I may put it in this way—an industry engaged in the "sexy" forms of technology like the Concorde. Perhaps I may point out in passing that we are spending hundreds of millions of pounds on an aeroplane for which we are not at all sure that we shall have any firm orders. There well may be good technological and employment reasons for doing it, but I contrast that with the position of shipbuilding and the constant strictures we hear about subsidising it.

The hon. and learned Member for Dover (Mr. Peter Rees) said, in effect, that the Government should back winners and be sure of a commercial return. We know that there is now being developed and built a sophisticated type of ship called the liquefied natural gas carrier, for which there is a growing world market. Other countries are subsidising that kind of ship.

Mr. Peter Rees

The hon. Gentleman misunderstood my theme somewhat. I did not say that the Government should only back winners. Most winners, or a great number of them, will be spotted by the market and be backed by the market. All I am saying is that, if the Government wish to back something which cannot be justified in purely commercial terms, they should say so and make their reasons clear.

Mr. Douglas

I am grateful for that intervention because it serves to make my point. If the market is making a judgment on the industry and on the future demand prospects for certain vessels, it is reasonable to point out that there are winners there, provided that other countries do not unduly subsidise competitive products. This is what we have to keep in mind—not so much what is being done by the Government in the United Kingdom but what other Governments are doing to protect their industry or to protect their strategic position.

I am reliably informed that the market at the upper level for this class of ship will be 170 vessels by the late 1980s. We are not building one in the United Kingdom and there is no prospect that we shall build any in the foreseeable future. But what is happening in the United States? I have figures to show that the United States Government, being concerned about the building of liquefied natural gas carriers for their own strategic purposes, are willing to subsidise these ships to the tune of 25 per cent. That may not sound much of a figure when one says it, but it is in fact 25 per cent. on ships costing in excess of £40 million each. It is £10 million a ship. That is what it is worth to them.

Therefore, if we are concerned about employment prospects, if we are concerned about a viable industry, the Treasury, in consultation with the DTI, ought to be saying to our shipbuilding industry that this is the form of support it will be given, that it will certainly be given facilities to embark on design studies and that this is the form of subsidy it can expect for this type of ship or for other types of ship. It is a matter of regret that we have removed investment grants from ship owners. The Government have yet to state their policy in this respect. In terms of a declining and difficult market, they have yet to state their policy after their survey of the industry and what they will do to replace investment grants for ship owners or what form of assistance will be forthcoming under Sections 7 and 8 of the Industry Act to support the shipbuilding industry.

That is an important industry. It is not a declining industry in world market terms. It is an industry which is in difficulty because it is being starved of capital development and because it has had numerous attacks made on it. That had led to difficulties in terms of manpower and management. At the risk of embarrassing my right hon. Friend the Member for Birkenhead (Mr. Dell), I would say that the most imaginative management I have seen in United Kingdom shipbuilding for a long time is that now in the charge of Cammell Laird shipbuilders. I am quite sure that the assistance the Government are giving to that industry in Cammell Laird will be money well spent. I take a large chance on my interpretation of the abilities of that yard with that management.

I turn briefly to the closing item in the Public Accounts Committee's Report where we say that we will investigate the question of North Sea oil and the way in which licences are given. It would be wrong of me to go into too much detail on that but I recognise that this is perhaps the most important event to have happened in terms of the United Kingdom economy. It is therefore important for this House that we make a searching inquiry as to the background and make an assessment of how the United Kingdom industry can benefit fully from the potential available.

I conclude on a note of criticism of the DTI in relation to what is happening in this industry at the present time. The DTI has set up a Ship and Manufacturing Technology Requirements Board to facilitate the customer/contractor relationship. The members of the board are distinguished gentlemen, but there is not a Scot among them. It is a criticism of Scottish industry that we cannot get a man of suitable calibre to be a member of the board. We might look at the implications of that criticism. The Government have set up this body with extensive terms of reference. The board's field of interest includes shipbuilding, shipping, hovercraft, marine technology including navigation, safety under water and operational studies. At least a large part of that is related to what is happening in the North Sea. On the Heriot-Watt campus we shall have a Department of Offshire Technology which is being built up by private funds. There are no public funds available at the present time. I consider that appalling. I want to know what public funds we shall have. Certainly in relation to this important board I would expect there to be some Scottish representation. I welcome, if possible, some indication from the Treasury Minister when he replies tonight of how he will approach his colleague on the DTI on this matter.

Mr. Dalyell

On a point of order, Mr. Speaker. My hon. Friend rather sadly remarked that there was still no DTI Minister on the Front Bench. A number of us gave notice this morning to the DTI that we hoped to raise subjects specific to that Department. There is a whole Roman legion of DTI Ministers. Would it not be possible for one of them to be present at this debate on the Public Accounts Committee's Report?

Mr. Speaker

That is not a matter for the Chair.

6.25 p.m.

Mr. Michael Barnes (Brentford and Chiswick)

I should like to associate myself with what has been said about the Chairman of the Public Accounts Committee. It is sad that he cannot be with us today, but it is good news that he is now out of hospital. I begin by paying a tribute to his chairmanship. His style is in marked contrast to the rather daunting magisterial style of his predecessor, Lord Boyd-Carpenter. His mas- tery of the subject and the touch of irony which he often brings to our proceedings—which often go unnoticed by some of the witnesses appearing before us—make him a very effective chairman indeed.

Although the Public Accounts Committee may have been fortunate in its chairman in recent years, I should like to start by making one or two observations on the difficulties that its members sometimes face in discharging their duties on the Committee. I have been a member of the Committee for the longest continuous period of any of the members at present on it, since 1967, and my main feeling about the Committee is that we have much more difficulty in getting on equal terms with the witnesses appearing before us than is often apparent from our reports. There have been one or two improvements in this respect in recent years, two of which stemmed from suggestions made by myself.

When I first came on to the Committee I found it extraordinarily difficult sometimes to get at the true significance of some of the Comptroller and Auditor-General's reports, so neutral is the prose—and this applies to all Comptrollers and Auditors-General—employed traditionally in his reports. With some temerity I raised this matter in the Committee a few years ago. The Committee agreed to ask the Comptroller and Auditor-General to improve the method of briefing Members in order to point our noses more in the right direction. This is now done, and it has been a great help.

A second difficulty I find on the Committee is the bewildering speed at which we switch from examining civil servants on aircraft contracts on, say, a Monday to the Forestry Commission on a Wednesday, and then the following Monday we may be looking into accountability for naval stores.

It seemed important to me that we should not spend all our time on the Committee in cross-examination but that we should occasionally—certainly when we are faced with a difficult inquiry—spend a little bit of time discussing among ourselves on the Committee exactly how a cross-examination and the inquiry should be carried out. This we do, and it has been a considerable improvement. However, much of our cross-examination is still imperfect. We have too much difficulty in getting on equal terms with the people appearing before us.

The accounting officers whom we examine are the permanent secretaries of Government Departments. They are men of high calibre. Men like Sir Michael Cary or Sir Basil Engholm have to be batting on a very bad wicket indeed before they have difficulty in getting on top of anything we are able to bowl at them. It is a fact about the British political system that we have a first-class Civil Service, composed of high-calibre people, who are on the whole cleverer and more able than Ministers and Members of Parliament. Ministers and Members of Parliament have different talents. We are supposed to be better at making decisions; we are supposed to be better at spotting bad decisions. My hon. Friends will probably not agree with me but it is my feeling that the intellectual armoury which we in this House are able to bring to bear, man for man, is somewhat inferior to that of our opposite numbers in Whitehall. If the object of the Public Accounts Committee is to protect the interests of the taxpayer and to uncover abuses in the way public money is spent, we need to have the dice loaded more in our favour than is the case at present.

What I should really like to see is the PAC put out of business by a series of Select Committees for each Government Department. Such committees could scrutinise and investigate the entire working of a Government Department on a continuing basis. The members of such committees would build up a great deal of expertise over a long period. When it came to inquiring into accountability, they would be able to do a much better job than the PAC is now able to do.

There are two examples in the Third Report of our proceedings in the last Session about which I am concerned because they show too lax an attitude towards the way in which the taxpayers' money is being spent. Both examples concern the Services. One is the Jaguar aircraft, which is dealt with in our report, beginning at paragraph 27, and the other is the refitting of naval vessels, which is dealt with at paragraph 82. My hon. Friend the Member for West Lothian (Mr. Dalyell) remarked that the conclus- ions of the PAC were often couched in modest language. That is so. The trouble is that sometimes very important conclusions are only fully understood by those who are familiar with the language and the nuances that we bring to bear in our reports.

The purpose of the debates which we have every year should be to point up some of the understatements that appear in our reports. I will do this by using as an example the Jaguar aircraft, which is an Anglo-French project. The Services saw a need for a supersonic advanced pilot training aircraft, which they wanted to have available in 1975. They then decided that they needed it in 1972. Then they decided that what they really wanted was a tactical strike version of the aircraft. They wanted that in 1973. They were prepared to defer the trainer version until 1973–74. But they would still have more trainers than tactical strike versions. They were to have 55 per cent. trainers and 45 per cent. tactical strike aircraft. They then decided that the trainer version was too costly and that what they really needed as a trainer was a completely new and less sophisticated aircraft. So they decided that that was what they would have for use in 1976.

When the Committee inquired about the situation it was explained that it was perfectly logical. We record at paragraph 34: It thus proved possible to adjust the Anglo-French Jaguar programme to changing circumstances and requirements. Perhaps those concerned with the project were very lucky. Indeed, we make that remark in the following paragraph and we say: They"— that is the Committee— trust that in future the Ministry will … be able to obtain cost-effective aircraft from good planning rather than good fortune. But the attitude involved is still very worrying. Those who are concerned with aircraft contracts, which cost a vast amount of money, and those who are responsible for persuading Ministers to agree to the placing of orders for such aircraft, must adopt a much more rigorous and less haphazard method of drawing up their requirements.

My second example is the special refitting of HMS "Tiger" and HMS "Blake". The purpose of the refits was to enable both cruisers to operate four Wessex helicopters. The refits were planned to take 18 months and to cost £5 million each. The "Blake" refit took over four years and cost over £7 million. The "Tiger" refit took over five years and cost over £13 million. Thus over £20 million was spent on refitting two cruisers over five years to deploy eight helicopters.

The contrast between the Jaguar and the refits is interesting. Apparently the Jaguar is needed for a world that is moving so fast that the requirements cannot be foreseen from year to year—the requirements kept changing between 1964 and 1969—whereas poor old "Tiger" and "Blake" and their helicopters are inhabiting a world that is so slow-moving that it is possible to take five years to do something that was originally intended to be done in only 18 months.

Both examples are equally regrettable. It is necessary when we come across examples of this kind to try to get behind the Ministers and civil servants to the people in the Services who, in my view, are largely responsible for this kind of planning. By that description I mean the serving officers on the Air Force and Admiralty Boards. They are very senior officers who are largely anonymous. Many of us do not know who they are as they are shielded by civil servants and Ministers. I suspect that they are regarded with a great deal of awe by Ministers and that they are inclined to say "We had better have the aircraft. If there is a chance of having it, let us have it. We will worry about what it is for later" or, to take the example of the "Tiger" and the "Blake", "If we can get the work started on the cruisers, let us get it in hand. If other things are more important, they can be put down the list."

The country spends vast amounts of money on defence, which is a huge burden on individual taxpayers who have to find the money. The taxpayers hope when they fork out the money that it is needed and that it will be properly spent. In my view the Jaguar and the special refits throw doubt on both points. I hope that the comments in the PAC Report will be a salutary reminder to the highly-paid Service chiefs that they need to be very humble in the spending of these vast amounts of money over which they exercise a great deal of influence. It is not just the State's money which is being spent. It is not impersonal. It is the sum total of the hard-earned money of many millions of individuals who in the main live a very different kind of life to the over-privileged existence that many people, such as the Service chiefs on the Air Force and Admiralty boards, are able to live.

The service officers on the Air Force and Admiralty boards exercise enormous influence on the shaping of defence budgets. It is important that they should not remain as anonymous as they are now. It should be possible for the House—and I hope that it will do so in future—to probe more deeply than it has been able to do so far and to reach behind the Ministers and the accounting officers, who in the main are the people whom the PAC cross-examines, and to deal directly with the people such as the serving officers I have mentioned, who often influence very decisively the decisions which are made on costly and expensive contracts such as the two to which I have referred.

6.39 p.m.

The Financial Secretary to the Treasury (Mr. Terence Higgins)

This is a traditional occasion, when the House rightly considers the careful studies which the Committee of Public Accounts has been carrying out. It is probably true that one of the traditions is that the debate tends to be very sparsely inhabited, and after an all-night sitting on the Consolidated Fund Bill one might have expected that tradition to be well honoured on this occasion. Yet the House has been reasonably full throughout a debate on matters as technical as those which we have been discussing.

When one considers the attendance which we had only a couple of days ago on a day devoted to value added tax—I sat through that debate as I have sat through this one—one sees that the number of hon. Members present has been greater on this occasion, other than during the opening and closing speeches. This shows the interest that both those who have served on the Committee and a number of others take in these matters.

Almost every hon. Member has referred to the regrettable absence of the right hon. Member for Manchester, Cheetham (Mr. Harold Lever) who has served as chairman of the Committee. The right hon. Member for Birkenhead (Mr. Dell) said that the Committee had been stimulated, guided and amused by the right hon. Member. All of us have frequently been stimulated and amused by the right hon. Member; whether we have been guided on every occasion is perhaps another matter. But I think that I speak on behalf of the whole House in wishing him a rapid recovery. We hope to see him with us again very soon. This sentiment has been reflected in almost every speech and I am sure is shared by everyone. The right hon. Gentleman's character has imprinted itself on the deliberations of the Committee.

The House will agree that the right hon. Gentleman could not have had a better deputy in moving this motion than the right hon. Member for Birkenhead, who carried out a very comprehensive survey of the work that the Committee has been doing, and took a particular theme on which to thread his remarks.

I am reminded of a story that the right hon. Member for Manchester, Cheetham once recounted in the House. I cannot presume to tell it anywhere near as well as the right hon. Gentleman, but it concerned an examinee who noticed that previous examination papers had been mainly historical and proceeded to mug up the Kings of Israel in great detail for the coming examination. He was horrified to find, when he took the examination, that the questions were nearly all geographical, including the first. To that question he gave his answer, "I know nothing about geography but here is a list of the Kings of Israel."

Any Financial Secretary replying to this debate is tempted to find himself in that position—namely, to say, "Enormous numbers of wide-ranging questions on the responsibilities of every conceivable Minister have been raised, but here is the speech that I intended to make anyway." That is not quite the case; I will try to reply to a number of specific questions, although a number of matters of policy do not arise on this occasion, because the Public Accounts Committee is concerned not with policy but with administration.

It would be a mistake to suppose that the work of the Committee is without interest. I have a whole file of Press cuttings here of its various reports—notably, one in The Times of 11th September on public accountability and one in the Financial Times on 1st September headed "Learning from the Past". This is a theme which is now very much part of the work which the Public Accounts Committee has been doing in recent years under the chairmanship of the right hon. Member for Cheetham. As has been said, it has to consider the experience of the past in order to learn lessons for the future. This is a very important matter and I have studied carefully the various lessons which have been brought to our attention on this occasion as on previous occasions.

This debate is an annual occasion. It has been held every year bar one since 1960, in respect to the wishes of the House, although the Public Accounts Committee itself goes back even further—to 1861, when it was established on a motion of Mr. Gladstone. It is appointed each Session under Standing Order No. 86. The right hon. Member for Birkenhead pointed out that the Committee for this Session had not yet been established, although, as he appreciated, there is a later motion on to-day's Order Paper establishing the Committee for this Session. I have to confess that I am not conversant with the precedents as to how long a delay normally takes place, but it is on the Order Paper today and both the right hon. Gentleman's name and mine appear there.

The first meeting of the Committee is something that I view with some interest, because I am told that, traditionally, the Financial Secretary, although on the Committee, is expected to appear only at the first meeting, unless something remarkable happens. So I was looking with interest to see when the motion would appear and the meeting be held.

It is important that members of the Committee should examine the permanent heads of Government Departments in their capacity as accounting officers. In that respect, the hon. Member for Brentford and Chiswick (Mr. Barnes) stressed the need to ensure that there was a reasonable balance between those whom it was questioning and the Committee itself. It is important to remember the point of the hon. and learned Member for Northampton (Mr. Paget) who said that, in a sense, the main authority of the Committee depended on the mere fact of its existence. This is true. All Government Departments are well aware of the power and authority of the Committee and it stems from the careful scrutiny that it gives to many areas.

It is true that, in the early years, it was primarily concerned with accounting regularity and propriety. Although that is still the case, in recent years it has been more and more concerned with getting value for money. If a theme can be discerned in the Committee's work in recent years, it is that. That being so, a number of lessons have been learned on which, from time to time, the Committee has concentrated, although perhaps it has never actually brought together the lessons in an easily tabulated form.

There has been reference in the past to problems of evaluation, in the context of the Atomic Energy Authority for example. There has been an increasing number of cases in which it is a question of the problems of risk evaluation. This stems from what the right hon. Member for Birkenhead was saying, that the Committee has been concerned—for example in the question of the RB211 or of the Jaguar aircraft—to look at what the reasons may be, either commercial or technical, whether in the commercial sphere or in defence, and how well they were evaluated, and the extent to which the Government succeed in getting the right means towards the ends which have been set out in policy statements.

There is also the question of the extent to which Government Departments should become involved with the accounting procedures of particular companies which receive Government money. My hon. Friend the Member for Hove (Mr. Maddan) particularly referred to this.

The hon. Member for Brentford and Chiswick referred to the Jaguar project. The Ministry recognises the importance of being on the alert for changes in requirements which might affect development projects, whether they are on a collaborative basis or not. But it is not possible, he will agree, to avoid changes in requirements altogether, and the Royal Air Force is of necessity updating and adjusting its requirements in order to remain abreast of its defence commitments.

The Procurement Executive exists to provide the necessary hardware at the right moment and it needs to react with flexibility. I should have thought that while the wording of that section of the report was framed perhaps with a little more subtlety than the usual bland expressions which are used, none the less this is an occasion when there is no ground for criticism. I think that in this case it is rather a question of the events turning out to be fortunate rather than unfortunate. The whole area is one in which there is great unpredictability, and the essential requirement is flexibility.

It is fortunate here that there turned out to be the flexibility which was necessary in the changed circumstances. It is a little odd that whenever things turn out the wrong way we complain and when they turn out the right way we complain; and, that being so, I should have thought that there were grounds here for satisfaction rather than criticism at the out-turn, since it is the out-turn with which we are ultimately concerned. That is not to say that we should not do our best ex-ante rather than ex-post in anticipating problems as we go.

A number of points have been raised by the hon. Member for West Lothian (Mr. Dalyell). They do not all by any means refer to the Department of Trade and Industry, although on a number of occasions this afternoon the hon. Gentleman made a number of interventions concerning that Department. As he has recognised, a number of the Ministers in that Department are abroad, and this necessarily makes additional claims on their colleagues. However, I assure the House that no discourtesy is intended by their absence from the debate this afternoon. This is essentially a Treasury debate, and the Secretary of State and the Under-Secretary of State for Scotland have also been present and, indeed, have heard the hon. Gentleman's speech.

I shall endeavour to answer the specific points which the hon. Gentleman raised. He referred first of all to the situation of the technical cost officers. I understand that the position is considerably better that it was two years ago. He may have seen Sir Michael Cary's answer to question 1902 in the Third Report, which dealt with that matter. I understand that the situation has improved even further since that answer was given in March. But naturally this is a question of staffing and it is one which puts claims on scarce resources. It is a question of trying to achieve the best balance possible. The elasticity of supply in these circumstances is not always as great as one might hope, but I understand that the point was covered in the answer to which I referred and that the situation has improved since.

The hon. Gentleman raised other points concerning Rolls-Royce and the role of Her Majesty's Government in the management changes at Rolls-Royce (1971) Limited. He has had Questions on the Order Paper on this subject, to which he referred. He will be aware that the changes were made by the company, and naturally as the sole shareholder, the Government were concerned; they discussed the matter with the company and the changes were made with the Government's approval. I do not think that this is directly relevant to the report of the Public Accounts Committee, and it would be invidious, as my hon. Friend said earlier this week, to answer specific questions on the appointment of specific individuals. This is essentially a matter for the company.

Similarly, on the question of the independent expert which the hon. Gentleman raised, this matter has been put in the hands of the independent expert, and the parties to the sale agreed on the procedure to be followed. I therefore do not think it would be appropriate for me on this occasion to go into greater detail.